FIA detects mega scandal in PIA

The Federal Investigation Agency (FIA) has detected a mega corruption scandal in Pakistan International Airlines (PIA) pertaining to the upgradation of the business class. FIA Sindh chief Amir Farooqi on Monday claimed to have arrested a former director engineering of the PIA.

The spokesman for the FIA said the FIA’s Corporate Crime Circle (CCC) Karachi had conducted an inquiry and the FIR lodged in this regard said that by the order of the apex court of Pakistan in a human rights case, a special audit of PIA Corporation Ltd was conducted, which led to an audit para pertaining to corruption and corrupt practices in projects for the upgradation of business class seats.

In the Flight Entertainment System and Integration of the both resulting in a wrongful pecuniary loss of 5.3 million euros and $1.65 million without delivery of any contracted material or services, causing losses to the public exchequer and consequently an inquiry number (67/2018) of the FIA’s CCC, Karachi, was registered under the orders of the competent

authority.

In its 351st meeting dated October 31, 2013 and November 1, 2013, the PIACL Board of Directors approved an interim business class programme as under.

“Upgrade business class seats to full flatbed seats, upgrade Inflight Entertainment System to best in class system. Change cabin ambiance inter alia including carpets, seat covers, curtains, side trim, panels, toilets, galley equipment, special business class menu and cutlery. Designated trained cabin crew and Business class utility pack and gift items.

On October 31, 2014, a tender for two 777-200LR business class seats was published under PPRA rules. On December-3, 2014, technical proposals were opened by designated committee. On February-23, 2015, all the financial bids were opened and detailed out.”

It further reads that vide an email dated March 2, 2015 sent to Yaqoob Mughal, then deputy general manager purchase technical commercial, M/s Avio confirmed that 'existing IFE, hardware and software can be re-installed also on to the latest seat models'.

The Technical Evaluation Report dated January 23, 2015, and a presentation were also circulated along with agenda papers wherein merits and demerits of seats of business class of M/s Sogerma, M/s Zodiac and M/s Optimeres were presented. The presentation is silent about M/s Avio and nothing was placed before the committee.

“Thereafter, the matter was placed before BoD of PIA and vide 366 meeting dated April-14, 2015, the Board approved to replace business class seats on entire fleet of Boeing 777 by seats manufactured by M/s Sogerma and the amount available with the Air Bus Industry as credit note be ascertained and may be utilized for flatbed seats project."

The responsibility was assigned to now deceased Imran Akhtar, then director procurement, and accused Maqsood Ahmed, then director engineering.

However, the Board of Customer Services Committee did not recommend M/s Sogerma and they were not also the lowest bidder. As per comparative statement, the lowest bidder was M/s Avio ($1,664,024) whereas M/s Sogerma made a bid of $3,416,000. Accused Nasser N S Jaffer, then chairman, PIA, approved it dishonestly and illegally with ill motives by abusing his official position.

On October 29, 2015, a press tender notice was published in national newspapers for upgradation and replacement of the existing In-Flight Entertainment System and the last date of tender was November 30, 2015. As per the available record, neither any kind of study was done nor TOR was prepared.

Further, no evaluation criteria were prepared by the Engineering Department resulted in a wrongful pecuniary loss to public exchequer. However, vide minutes dated November 16, 2015, a committee having no legal standing and beyond the schedule of power of the PIACL unanimously suggested and approved upgradation the existing IFE system with the latest Panasonic Exk system instead of new IFE installation from different available IFE systems and approved M/s Panasonic, in violation of PPRA Rules 2004.

In this manner, the already floated tender was scrapped in violation of rules and regulations. Accused Nasser Jaffar, then chairman PIACL, and accused Maqsood Ahmed, then director engineering and maintenance, were the members of the undesignated committee.

However, vide a letter dated November 18, 2015, M/s Panasonic made financial proposal of $18,749,997 wherein $756,449 was advance payment vide a working paper dated December 1, 2015, prepared and signed by deceased Imran Akhtar Khan, then director procurement and accused Nasser N. S. Jaffer, then chairman PIACL, misguided the BCSC that the decision of the BoD pertaining to utilizing credit note for the project is not viable and dishonestly suggested that payment for the entire fleet of B-777 aircraft is to be arranged through financing activities.

They further manipulated that existing IFE system is not compatible with new seats. In its 23rd meeting dated December 7, 2015, the BCSC recommended to the board the acquisition of seats from M/s Sogerma with a financial impact not exceeding $15 million and $22 million for the IFE System with additional USD 5 Million for STC and MRO.

The said recommendations were presented before the BOD. In its 373rd meeting dated January 15, 2016 the recommendations were approved by BoD and the task was assigned to Maqsood Ahmed, then Director Engineering, and Imran Akhtar, then Director Procurement. The BoD approved financial limit and budget for integration and did not approve any vendor.

On March 8, 2016, a press tender notice was published in a national newspaper for STC and Integration MRO for retrofit and Installation of seats and IFE on B-777 fleet. After due process, the tender was awarded to M/s Jamco Aero Design and Engineering Pte Ltd (JADE) against an amount of $1.6 million wherein an advance amount was $929,000 but no formal contract was executed between the PIACL and M/s JADE.

On April 25, 2016, instead of formal meeting, the PIACL Board of Directors approved the following through circulation: advance payment of $756,449 without bank guarantee to M/s Panasonic Avionics Corporation for IFE System, advance payment of euros 2,580,800 without bank guarantee to M/s Sogerma for the upgradation of business class seats.

Vide working Paper dated May 5, 2016 prepared for the BoD by deceased Imran Akhtar, then director procurement and accused Bernd Hildenbrand, then acting CEO, wrongly intimated to the BoD that following advance payments are being paid:

2,580,800 euros in favour of M/s Sogerma, $756,449 in favour of M/s Panasonic and $1,666,000 in favour of M/s Jamco. They recommended approving the advance payment without a bank guarantee, detailed out as follows: 11,204,000 euros in favour of M/s Sogerma, $22,000,000 in favour of M/s Panasonic and $3,030,000 in favour of M/s Jamco.

Contrary to the resolution passed on April 15, 2016 (as stated above), lmran Akhtar and Bernd Hildenbrand illegally recommended approving an advance payment of 11.204 million euros, whereas vide the said resolution the BoD approved an advance payment of 2.58 million euros. The working paper is silent on the approval of 2.58 million euros and therefore the BoD was not intimated in this connection.

Thereafter, as per minutes of the first meeting of the PIACL, Muhammad Irfan Ellahi, then chairman of the PIACL, dishonestly presented the working paper before the BoD that following advance payments without bank guarantee may be approved and to those companies like M/s Sogerma and M/s Panasonic, which were selected against PPRA Rules:

11,204,000 euros in favour of M/s Sogerma, $22,000,000 in favour of M/s Panasonic

and $3,030,000 in favour of M/s JADE.

As per minutes of the 8th meeting of the BoD dated December 22, 2016. The BoD directed the management of the PIACL to explore the option of Letter of Credit instead of

advance payment.

Nonetheless, till November 2016, without executing any formal agreement, the PIACL made an advance payment of 5,331,600 euros (on different occasions) and $756,449 to M/s Sogerma and M/s Panasonic, respectively, in violation of PIA rules. Nonetheless, after releasing the advance payment, the PIACL executed an agreement with M/s Panasonic of 39.4 million, while the financial offer of M/s Panasonic was 18.749,997.

Whereas, in the absence of any formal agreement and approval of the BoD, the PIACL also made an advance payment of $929,000 to M/s JADE on Mayv17, 2016. All the advance payments without the bank guarantee made by the PIACL are a violation of Section 39 of PPRA Rules. Furthermore, the material and items and services against which advance payments and agreements were made were never received by the PIACL. The role of members of the BoD and others including those of other PIACL officers will be determined during the course of

investigation.

Thus accused persons -- namely Nasser N. S. Jaffer, then chairman PIACL, Irfan Ellahi, then chairman PIACL, Berned Hildenbrand, then acting CEO PIACL, Maqsood Ahmed, then director engineering and others -- by “abusing their official position caused a huge wrongful pecuniary loss to the public exchequer without the supply of any contracted goods or services from any company with their ulterior motives for their wrongful gains and their illegal act prima-facie constitute offences punishable of Prevention of Corruption Act 1947. Hence a case is registered against said accused persons under the order of competent authority and undersigned will investigate the case.” Further investigations are underway

The spokesman for THE FIA Sindh said that the officials of the FIA’s CCC hAD arrested former director Engineering PIA Maqsood Ahmed; however, raids are underway for the arrest of the remaining accused.